If you recently received a 1099-MISC from a credit card company or a bank and wondering if it’s a legitimate form, try to remember if you opened up any new accounts for the cash or reward point bonuses in the last year. In the tiny print at the bottom, the financial institution likely stated that a 1099-MISC would be issued in the event you satisfied all the promotion conditions. The 1099-MISC is a legitimate 1099 form and is used for Miscellaneous Income, banks consider these promotional payments to be miscellaneous income.

On the flip side, they don’t consider reward points earned through purchases as income. It’s like getting a rebate, you’re ultimately getting a discount on your purchase, not a commission payment for doing something (like signing up for an account). So, it’s generally accepted that you do not pay taxes on credit card rewards, but the IRS has yet to formally weigh in on the subject.

Here’s the kicker – some financial institutions are issuing 1099-MISCs for promotions involving reward points. So those promotions where you got 50,000 miles for signing up for a credit card? They’re valuing those miles in terms of dollars (well, in terms of cents) and issuing a 1099-MISC for it. What stinks about that scenario is that you didn’t get actual cash to start with and you’ve effectively “purchased” those miles at whatever rate they determine. It’s very sneaky (or very clever, depending on how you look at it).

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13 Responses to “1099-MISC Issued for Bank & Credit Card Bonuses”

I thought some of the banks may issue a 1099-INT and not a -MISC for sign up bonses. That has been my experience which checking account sign up bonuses. However I’ve quit doing that in the past year or so because the days of free checking with no minumum balance requirements are gone.

I am in the constant credit card churn, made some pretty good money in the past year… over $1500 from signing up for an AMEX gold card, and $500 from a Southwest Chase. I don’t really see how they can tax you on points though as these points can be redeemed at many varying redemption rates: gift cards, physical items, even cash..

I spend $3,000 to receive 50,000 points. That’s a rebate not income. Sign up bonus does not require you to spend. Only to park your money most times. If it involves spending or bill pay, that is a grey area.

Many banks are now doing this for things like iPads and other product promos they give you for signing up. They will report the value of the product as interest to the IRS. As always, it’s all in the fine print.

In 2011, Bank of America credited $75 to my checking account which is a California online account. However they did not issue 1099-MISC or any such form. They said since the gift/reward was below $600, 1099-MISC or any such form is not issued to customer.
Should I voluntarily add $75 to my federal and state income when I file tax returns now? Or can I leave the $75 as it is?

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